European carbon prices closed flat on Tuesday, holding up in the face of a softer energy complex.
The benchmark Dec-16 EUA futures on ICE ended at €4.88 after trading in a narrow €4.77-4.90 range.
Volume was on the light side at 11.3 million units changing hands, with a further 1 million traded down the rest of the ICE futures curve.
In climbing back from its intraday low, the contract also bounced off its lower Bollinger band, suggesting some technical support below €4.80.
The bands are also narrowing amid the EUAs’ lack of volatility in recent days, indicating that prices could soon break out to either the upside and retest recent highs of €5.49, or to the downside and approach the 22-month low of €4.62 hit twice last month.
Brent crude, to which EU carbon has been closely correlated recently, was off by around $1 to $38.50/barrel on Tuesday, while German calendar-year baseload power lost as much as 2%.
Lower Rotterdam coal futures and a firmer euro weren’t enough to offset the impact of the German power price decline on the country’s clean dark spreads, which softened slightly to reduce carbon’s attractiveness for utilities.
A group of 25 EU nations earlier in the day sold 3.425 million spot EUAs for €4.81 each, in an auction that cleared 2 cents above market and attracted 21 participants that submitted bids worth a total 8.48 million tonnes.
That equated into a bid-to-cover ratio of 2.47, which was slightly above the March mean of 2.42 and notably higher than the year-to-date average of 2.24.
“The market does appear to have stabilised, and this week could see a little bit of stimulus for prices to edge up above €5. Auction volumes are going to be down by 3.5 million tonnes week-on-week, with 13.8 million on offer,” said Trevor Sikorski, an analyst with Energy Aspects.
Auction quotas will average at that level until the first week of April.
“The market now has three weeks at this lower level of auctions, while the weather looks like it will not venture far from seasonally normal temperatures. As such, prices could see a bit of upside even if they are unlikely to move too far from that €5 marker,” Sikorski added.
By Mike Szabo – mike@carbon-pulse.com
